Problem on financial management

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Three months after having completed the supply, and commissioning of capital equipment to approval of a public body, supplier complained about non payment of the contract amount of Rs 23 million. The public body explain to Procurement Policy Office that its Finance Section was refusing to pay as it had discovered that the performance security did not cover warranty period as stipulated in the letter of acceptance. The supplier was not agreeing to adapt it despite several telephone calls.

At last, the public body wrote a letter to the supplier and explained why payment was not being affected. Within 5 days a modified performance security was arriving from the supplier, but compensation was effected after deducting liquidated damages for one week of delay in delivery.

The supplier protested that public body had asked to withhold the delivery for a whole month as electrical installation works had not been completed. The public body argued that it was due to the fact that the supplier had postponed giving the specifications by 5 days.

(a) Recognize weaknesses at the public body and discuss what remedial action you would propose to keep away from recurrence in the future.

(b) Examine whether it was fair for the public body to deduct liquidated damages giving two reasons to hold your opinion.

Reference no: EM132631

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